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5 Inverse Tech ETFs That Rose on Nasdaq Entry Into Correction
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The tech-heavy Nasdaq Composite Index entered into correction territory (down 10% from the peak) last week thanks to a steep drop in the big tech stocks. This marks the 70th correction in its 52-year history. The so-called "Magnificent Seven" failed to reassure investors in the face of heightened geopolitical risks and rising Treasury yields.
This resulted in a spike in inverse or inverse leveraged tech/Nasdaq ETFs as these fetch outsized returns on quick market turns in a short span. The ETFs that spiked are Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) , Direxion Daily GOOGL Bear 1X Shares ETFGGLS, Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report) , ProShares UltraPro Short QQQ (SQQQ - Free Report) , and BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD - Free Report) .
These products either create a short position or a leveraged short position in the underlying index through the use of swaps, options, future contracts and other financial instruments.
The "Magnificent Seven" stocks that powered this year's rally have wiped off $386 billion from their market capitalization after reporting disappointing earnings. Four of the seven stocks — Microsoft (MSFT - Free Report) , Alphabet (GOOG - Free Report) , (GOOGL - Free Report) , Tesla (TSLA - Free Report) and Meta Platforms (META - Free Report) — slumped after their earnings announcement, while Amazon (AMZN - Free Report) was the bright spot. The other two stocks, Apple (AAPL - Free Report) and Nvidia (NVDA - Free Report) , are yet to report.
In particular, Alphabet erased almost $180 billion in market value after the company’s Cloud unit revenues trailed analyst estimates despite beating the Zacks Consensus Estimate. Tesla’s value shrank by $72 billion in one day after the electric automaker posted its lowest profit in two years (read: Alphabet ETFs: Should You Buy the Dip?).
Facebook’s parent company Meta Platforms reported its most profitable quarter in years and the highest quarterly revenues since going public more than a decade ago. The third-quarter results are the strongest since Mark Zuckerberg rebranded the company from Facebook to Meta almost two years ago. However, META shares fell on the company’s warning of weaker advertising trends in the fourth quarter. Microsoft shares also dropped 3% despite the better-than-expected results and an upbeat revenue outlook for the current quarter.
Amazon climbed nearly 7% after third-quarter earnings tripled from the year-ago quarter. The e-commerce platform bucked the recent trend of slowing growth in its computing business (read: Amazon Q3 Earnings Triple YoY: ETFs to Tap).
Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) – Up 11.8%
Daily Dow Jones Internet Bear 3X Shares provides a three-times inverse play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index. Daily Dow Jones Internet Bear 3X Shares has attracted $38.4 million in its asset base and charges 95 bps in annual fees. The ETF sees an average daily volume of about 412,000 shares.
Direxion Daily GOOGL Bear 1X Shares ETF offers inverse exposure to the performance of the Class A shares of Alphabet. It has accumulated $2 million in its asset base and charges 95 bps in annual fees. The fund trades in an average daily volume of 27,000 shares.
Direxion Daily Semiconductor Bear 3x Shares targets the semiconductor corner of the technology sector with three times inverse leveraged exposure to the ICE Semiconductor Index. Direxion Daily Semiconductor Bear 3x Shares has amassed about $834.1 million in its asset base while charging 89 bps in fees per year. Volume is good as it exchanges 66.7 million shares per day on average.
ProShares UltraPro Short QQQ provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. It has AUM of $4.2 billion and trades in an average daily volume of about 123 million shares.
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD - Free Report) – Up 6.5%
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN seeks to offer three times inverse leveraged exposure to the NYSE FANG+ Index, an equal-dollar weighted index, targeting the highly-traded growth stocks of next-generation technology and tech-enabled companies in the technology and consumer discretionary sectors.
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN has accumulated $254.6 million in its asset base. It charges 95 bps in annual fees and trades in an average daily volume of 9 million shares.
Bottom Line
While the strategy is highly beneficial for short-term traders, it could lead to huge losses compared with traditional funds in fluctuating markets. Due to their compounding effect, investors can enjoy higher returns in a short period of time, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
Further, their performance could vary significantly from the actual performance of the underlying index over a longer period compared to a shorter period (such as weeks or months).
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5 Inverse Tech ETFs That Rose on Nasdaq Entry Into Correction
The tech-heavy Nasdaq Composite Index entered into correction territory (down 10% from the peak) last week thanks to a steep drop in the big tech stocks. This marks the 70th correction in its 52-year history. The so-called "Magnificent Seven" failed to reassure investors in the face of heightened geopolitical risks and rising Treasury yields.
This resulted in a spike in inverse or inverse leveraged tech/Nasdaq ETFs as these fetch outsized returns on quick market turns in a short span. The ETFs that spiked are Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) , Direxion Daily GOOGL Bear 1X Shares ETF GGLS, Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report) , ProShares UltraPro Short QQQ (SQQQ - Free Report) , and BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD - Free Report) .
These products either create a short position or a leveraged short position in the underlying index through the use of swaps, options, future contracts and other financial instruments.
The "Magnificent Seven" stocks that powered this year's rally have wiped off $386 billion from their market capitalization after reporting disappointing earnings. Four of the seven stocks — Microsoft (MSFT - Free Report) , Alphabet (GOOG - Free Report) , (GOOGL - Free Report) , Tesla (TSLA - Free Report) and Meta Platforms (META - Free Report) — slumped after their earnings announcement, while Amazon (AMZN - Free Report) was the bright spot. The other two stocks, Apple (AAPL - Free Report) and Nvidia (NVDA - Free Report) , are yet to report.
In particular, Alphabet erased almost $180 billion in market value after the company’s Cloud unit revenues trailed analyst estimates despite beating the Zacks Consensus Estimate. Tesla’s value shrank by $72 billion in one day after the electric automaker posted its lowest profit in two years (read: Alphabet ETFs: Should You Buy the Dip?).
Facebook’s parent company Meta Platforms reported its most profitable quarter in years and the highest quarterly revenues since going public more than a decade ago. The third-quarter results are the strongest since Mark Zuckerberg rebranded the company from Facebook to Meta almost two years ago. However, META shares fell on the company’s warning of weaker advertising trends in the fourth quarter. Microsoft shares also dropped 3% despite the better-than-expected results and an upbeat revenue outlook for the current quarter.
Amazon climbed nearly 7% after third-quarter earnings tripled from the year-ago quarter. The e-commerce platform bucked the recent trend of slowing growth in its computing business (read: Amazon Q3 Earnings Triple YoY: ETFs to Tap).
Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) – Up 11.8%
Daily Dow Jones Internet Bear 3X Shares provides a three-times inverse play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index. Daily Dow Jones Internet Bear 3X Shares has attracted $38.4 million in its asset base and charges 95 bps in annual fees. The ETF sees an average daily volume of about 412,000 shares.
Direxion Daily GOOGL Bear 1X Shares ETF (GGLS) – Up 10%
Direxion Daily GOOGL Bear 1X Shares ETF offers inverse exposure to the performance of the Class A shares of Alphabet. It has accumulated $2 million in its asset base and charges 95 bps in annual fees. The fund trades in an average daily volume of 27,000 shares.
Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report) – Up 8.1%
Direxion Daily Semiconductor Bear 3x Shares targets the semiconductor corner of the technology sector with three times inverse leveraged exposure to the ICE Semiconductor Index. Direxion Daily Semiconductor Bear 3x Shares has amassed about $834.1 million in its asset base while charging 89 bps in fees per year. Volume is good as it exchanges 66.7 million shares per day on average.
ProShares UltraPro Short QQQ (SQQQ - Free Report) – Up 7.9%
ProShares UltraPro Short QQQ provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. It has AUM of $4.2 billion and trades in an average daily volume of about 123 million shares.
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD - Free Report) – Up 6.5%
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN seeks to offer three times inverse leveraged exposure to the NYSE FANG+ Index, an equal-dollar weighted index, targeting the highly-traded growth stocks of next-generation technology and tech-enabled companies in the technology and consumer discretionary sectors.
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN has accumulated $254.6 million in its asset base. It charges 95 bps in annual fees and trades in an average daily volume of 9 million shares.
Bottom Line
While the strategy is highly beneficial for short-term traders, it could lead to huge losses compared with traditional funds in fluctuating markets. Due to their compounding effect, investors can enjoy higher returns in a short period of time, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
Further, their performance could vary significantly from the actual performance of the underlying index over a longer period compared to a shorter period (such as weeks or months).